Ickes v. Bache Halsey Stuart Shields, Inc.

• Decision Date: 10 August 1982
• Docket Number: CA-CIV,No. 1,1
• Citation: 650 P.2d 1282,133 Ariz. 300
• Parties: , 34 UCC Rep.Serv. 1253 Rose ICKES, a widow, Plaintiff-Appellee, v. BACHE HALSEY STUART SHIELDS, INC., Defendant-Appellant. 6292.
• Court: Arizona Court of Appeals

Page 1282

650 P.2d 1282

133 Ariz. 300, 34 UCC Rep.Serv. 1253

Rose ICKES, a widow, Plaintiff-Appellee, v.BACHE HALSEY STUART SHIELDS, INC., Defendant-Appellant.

No. 1 CA-CIV 6292.

Court of Appeals of Arizona Division 1, Department A.

Aug. 10, 1982.

Winston & Strawn by W. Charles Thomson, Richard W. Shapiro, Phoenix, for defendant-appellant.

Murphy, Ingraham & Clements by Timothy A. Ingraham, William A. Clarke, Phoenix, for plaintiff-appellee.

OPINION

CORCORAN, Judge.

The primary issue on this appeal is whether a factual issue was raised precluding summary judgment against Bache Halsey Stuart Shields, Inc.(Bache) for conversion of a forged check with a forged endorsement.We affirm.

The pertinent facts, briefly stated, which give rise to this litigation are as follows.In January, 1981appelleeRose Ickes(Mrs. Ickes) was introduced to Roger Giles by her nephew and subsequently rented Giles a room in her home.Giles studied the stock market and on several occasions advised Mrs. Ickes to purchase stock.Mrs. Ickes' confidence in Giles led her to open a brokerage account at Charles Schwab & Co., Inc.(Schwab) and execute a Limited Special Power of Attorney allowing Giles to buy and sell for this account.The power of attorney did not authorize Giles to receive money from the account nor to endorse her name on checks.

On February 17, 1981 Giles purchased 1000 shares of Tandy stock for Mrs. Ickes' account at Schwab.Approximately ten days later, when Mrs. Ickes was out of town, Giles directed Schwab to sell the stock which resulted in a $40,192.55 credit to the account.On March 6, 1981 Schwab issued and apparently mailed a check for this amount with "Rose Ickes" as payee.Although the record is unclear as to Giles' precise actions, Giles obtained this check without authority and without the knowledge of Mrs. Ickes.

On March 9, 1981 Giles took the check to the Bache office in Scottsdale, Arizona where he had a personal securities account and requested that it be deposited to his account.The check had a forged endorsement of Mrs. Ickes' signature on its reverse side.The Bache branch manager, Melvin Selbst, noted that the depositor was not the payee and asked Giles about this discrepancy.Giles informed Selbst that he had a power of attorney from Rose Ickes.Mr. Selbst was not shown the Limited Special Power of Attorney; neither did he attempt to contact Mrs. Ickes to verify her signature.See generallyRestatement (Second) of Agency§ 167(1958).Selbst did inform Giles that Bache required a note from Mrs. Ickes authorizing the deposit and directed another Bache employee to inform Giles of the contents required in a written authorization.This employee dictated the verbiage required in the note.Giles returned the same day with a note scribbled on Bache's own note pad with another forged signature of Mrs. Ickes.

Bache did not require any guarantee or notarized proof of the endorsement for the signature on the check or the note but simply compared the signature on the note with the signature on the check.Further, Bache did not require Giles to endorse the check below Mrs. Ickes' forged signature.The check was accepted by Bache and the monies deposited to Giles' account.Subsequently, Giles removed all funds from this account and disappeared.

Rose Ickes brought suit against Bache and others on June 4, 1981.On September 3, 1981the trial court granted a motion brought by Mrs. Ickes for summary judgment against Bache for conversion of the check.Bache timely appealed the judgment.We affirm the trial court.

This matter is governed by the commercial code, specifically by A.R.S. § 44-2556(UCC § 3-419(3)) which provides in part:

A.An instrument is converted when:

....

3.It is paid on a forged indorsement.

....

C.Subject to the provisions of this chapter concerning restrictive indorsements a representative, including a depositary or collecting bank, who has in good faith and in accordance with the reasonable commercial standards applicable to the business of such representative dealt with an instrument or its proceeds on behalf of one who was not the true owner is not liable in conversion or otherwise to the true owner beyond the amount of any proceeds remaining in his hands.¹

Bache contends that summary judgment was improper because a factual issue exists concerning whether it acted in a commercially reasonable manner in depositing the check to Giles' account.In support of this contention, appellant cites authority including Continental Bank v. Wa-Ho Truck Brokerage, infra note 1, for the general proposition that what constitutes commercial standards must be decided on a case-by-case basis in the context of specific facts.However, where the material facts are undisputed, it is a question for the court.²Further, A.R.S. § 44-2556 makes good faith and commercial reasonableness affirmative defenses to conversion.Bache, therefore, had the burden of proving that its actions were commercially reasonable.³Citizens State Bank v. National Surety Corp., 612 P.2d 70(Colo.1980).See alsoContinental Bank v. Wa-Ho Truck Brokerage, supra;Robert A. Sullivan Construction Co. v. Wilton Manors National Bank, 290 So.2d 561(Fla.App.1974);National Bank of Georgia v. Refrigerated Transport Co., 147 Ga.App. 240, 248 S.E.2d 496(1978);Berkheimers, Inc. v. Citizens Valley Bank, 270 Or. 807, 529 P.2d 903(1974).

In Continental Bank this court reversed summary judgment against a defendant bank for conversion of over 100 checks having unauthorized endorsements.Plaintiffs were companies whose bookkeeper had diverted checks made payable to the plaintiffs by using a rubber stamp endorsement entrusted to him by plaintiffs.The bookkeeper had deposited these checks to an account for which the signature card indicated he was doing business as the plaintiffs.In opposition to the plaintiffs' motion for summary judgment the bank presented affidavits of two expert witnesses familiar with banking practices concerning third-party checks bearing unrestricted endorsements.The affiants stated that their review of the record led them to conclude that the bank had acted in accordance with reasonable commercial standards.This court held that:

We are not prepared to say, especially in view of the Bank's affidavits on the subject, that as a matter of law, the Bank, under these circumstances, acted contrary to reasonable commercial standards.The most we are prepared to say is that a factual issue on this subject has been raised.

122 Ariz. at 420, 595 P.2d at 212.

Unlike the expert testimony presented by the defendant in Continental Bank, Bache's response to the motion for summary judgment was limited to an affidavit of its branch manager stating that Bache had initially refused to accept the check until it was made aware that Giles had a power of attorney and lived at the same residence as Mrs. Ickes.The affidavit further stated that Bache accepted a note purportedly from Mrs. Ickes authorizing the deposit of the check.Further, in contrast to the facts in Continental Bank, no assertion was made in the instant case that Mrs. Ickes' conduct constituted negligence substantially contributing to the forgeries.SeeA.R.S. § 44-2543(UCC §...